Pedro Pecson was the owner of a commercial lot on which he built a 4-door-2-storey apartment building. He failed to pay realty taxes amounting to P12k so the lot was sold at public auction to Mamerto Nepomuceno who later on sold it to the Sps. Nuguid.

Pecson challenged the validity of the auction before the RTC but was dismissed but the RTC held that the apartment bldg was not subject of the litigation. On appeal, the CA appealed in toto the decision of the RTC that the apartment bldg was not included in the auction sale.

After an entry of judgment was made, the Sps. Nuguid filed a motion with the RTC for a motion for delivery of possession of the lot and the apartment bldg citing Art. 546 of the CC. The RTC issued an order declaring that the owner of the lot and apartment bldg were the Sps. Nuguid and to pay the construction cost of the apartment before a writ of possession would be issued and to pay rent to the spouses. Pecson moved for reconsideration but the Trial court did not act on it, instead it issued a writ of possession. The CA affirmed in part the decision declaring the cost of construction can be offset from the amount of rents to be collected and that since Sps. Nuguid opted to appropriate the improvement, Pecson is entitled to be reimbursed the cost of construction at the time it was built in 1965 which is at P53k and the right the retain the improvement until full indemnity is paid.

Thus the case at bar.


Whether or not Art. 448 and 546 applies in the case at bar


> With regard to Art. 448, the provision on indemnity may be applied in analogy. Whoever is the owner of the land may appropriate whatever has been built, planted or sown after paying indemnity. However, it does not apply when the owner of the land is also the builder of the works on his own land who later on loses ownership by sale or donation.

> Art. 546 refers to the necessary and useful expenses which shall be refunded to the possessor in good faith with right of retention. However, it does not state how to determine the value of the useful improvement. The respondents [court and private respondents alike] espouses as sufficient reimbursement the cost of construction in 1965, however, this is contrary to previous rulings which declares that the value to the reimbursed should be the present market value of said improvements so as not to unjustly enrich either of the parties. [the trial court erred in ordering Pecson to pay rent since the Sps. Nuguid has yet to pay the indemnity therefore Pecson has the right to retain the improvements and the income thereof. The case was remanded to the trial court for determination of the current market value of the apartment bldg and ordered the Sps to pay Pecson otherwise it shall be restored to Pecson until payment of indemnity.]